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I was recently made a partner in the firm that I work in. I received 15K shares at a face value of $0. I was told that a vesting would occur after 5 years where the anticipated vesting price would be $17.50 i.e. I would receive $262K. Last Sep'23, I received a K1 stating i'm 0.2% partner in the company. The company is valued $2B. The math doesn't add up. What am I missing?

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    Partnerships don't have shares. You should talk to a CPA to understand how this works
    – littleadv
    Commented Dec 19, 2023 at 23:22
  • That's where i'm stuck. The CPA I was working with doesn't even know how to file a K1 properly so had to go with TurboTax due to shortage of time. Any knowledgeable CPA you can refer who is reliable and would not charge me a ton?
    – Megatron
    Commented Dec 21, 2023 at 19:27
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    CPAs are usually local to where you are, but with a 0.2% stake in a $2B business I'd suggest not to be cheap on legal counsel.
    – littleadv
    Commented Dec 21, 2023 at 19:33

1 Answer 1

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The first thing to do is either.

  1. Contact HR or a senior partner you trust to discuss the numerous valid explanations for the inconsistency.

  2. Then ask your CPA or lawyer to go through the agreement if necessary after doing #1

  3. Vesting Schedule: You need to know the exact nature of the vesting schedule. Is it a lump sum?

  4. Valuation Methodology: Crucial to understand. Who is valuating it and based on what method? Verbally say it's worth $2B and actually see the method could be 2 different things.

  5. Share Class: Companies may have different classes of shares with varying rights and privileges. Confirm the class of shares you received. If I had to take a guess this would be the most probable reason.

  6. Dilution: Has the capital of the company been diluted since your partnership?

  7. Based on all this, your 0.2% could lead to a lot of different numbers.

Overall, you will need to seek outside professional advice on this if HR and partners cannot satisfy your query. It is probable that this could be easily answered internally.

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